As originally published in New Hampshire Business Review
In a special legislative session scheduled to begin November 7, the state will consider not just expanding the Medicaid program in New Hampshire but also a dramatic change in what sort of program Medicaid is. The dramatic nature of those changes and very uncertain finances make finding the common ground needed a difficult task at best.
Today, Medicaid covers people in specific eligibility categories rather than basing eligibility on income. To be eligible, one has to be poor (or middle income depending on the category) and also in a specific population (disabled or pregnant or diagnosed with breast cancer for example). The expansion envisioned by the federal government would change the program to make everyone under 138% of the federal poverty level eligible.
The largest newly eligible population under this scenario would consist of childless adults. Today, a monthly average of about 135,000 people are covered by Medicaid. The proposed expansion would increase that total by as much as 50%.
It’s important to remember that Medicaid does not pay for health coverage. It pays a small fraction of health coverage, nowhere near the cost, and expects the provider to make up the difference on those of us with private insurance. Medicaid rates are roughly one-third of what most of us or our insurance companies pay.
If a single provider has too great a share of Medicaid patients, he goes out of business because there simply aren’t enough paying patients to shift the cost to. So, to as great an extent as possible, private insurance is to be preferred and preserved with Medicaid as a last resort.
In New Hampshire, about half of the newly eligible population already has insurance. An additional percentage is eligible for heavily subsidized through the health exchanges. People at 100-138% of federal poverty will receive insurance with premiums capped at 2% of their income.
It would be wasteful and counter-productive to move any of that population to Medicaid. The plan favored by the recently concluded state commission would preserve private coverage for only a small subset of those with insurance or access to it.
The governor and supporters of hers have suggested a principle that should be more widely applied. For one category, those with breast and cervical cancer, they would keep the lowest income people in Medicaid but cover those at higher income levels through the exchange and private insurance. If we expanded that principle to the entire Medicaid population, we would move as many people into private but means-tested coverage as we added with expansion.
If the program is changed to make everyone below certain income levels eligible, it would be natural to try and ensure that Medicaid and its fractional reimbursement rates don’t consume an ever increasing share of the market forcing our costs higher.
Just as important, the financial costs of the program are unpredictable. The experience of the very few states that have expanded to childless adults in the past
is that the eventual costs were much higher than estimated – five times higher in one case. The only thing the researchers seem to agree on is that the expected cost is unpredictable.
It would be sensible for the state to impose a structural limit on its costs. Both total enrollment and, more important, total expenditures could be capped consistent with the projected budget upon which expansion decision making will be based. This is a reasonable restraint which would allow the program to exist but with a degree of financial certainty.
Many changes will require the state to play mother may I with the federal government but that should not be an obstacle. Any compromise that is acceptable will necessarily involve things that are not off the federal shelf.